Wireless Tax Burdens Continue to Grow

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.

October 18, 2016 - 10:23 — Deborah Collier

In December 2005, there were 207.9 million wireless subscriber connections in the U.S. As of the end of December 2015, that number had grown to 377.9 million wireless subscribers, a gain of more than 170 million over the ten-year period. Today’s mobile devices and services provide much more than just the ability to make a phone call. As new generations of mobile services have continued to innovate, wireless devices can now access email, text, and data allowing consumers to communicate through the internet.

On October 12, 2016, the Tax Foundation released its latest report on wireless tax burdens imposed by states on consumers’ wireless phone bills. This latest study shows that federal, state, and local taxes and fees on wireless consumers have increased for the second straight year, rising to an average of 18.6 percent of the monthly bill.

The report found that while competition has been driving down the cost of service to consumers, the bills continue to rise due to increased taxation and fees, with an average family of four now paying nearly $225 per year in taxes, fees, and government surcharges. Only five states (Alabama, West Virginia, Louisiana, Idaho, and Nevada) have lower state and local taxes on wireless services than the general tax rate

The report also noted that several states impose nearly crippling tax rates that could deter mobile adoption due to cost disincentives. These are Washington (18.78 percent state/local rate); Nebraska (18.67 percent state/local rate); New York (18.04 percent state/local rate); Illinois (17.84 percent state/local rate); and, Pennsylvania (15.70 percent state/local rate). When one adds in the federal USF fees, now set at 6.64 percent, the rate of taxation on wireless consumers can seem unsustainable, leading to combined rates of 22.34 percent in Pennsylvania, 24.48 percent in Illinois, 24.68 percent in New York, 25.31 percent in Nebraska, and a shocking 25.42 percent in Washington.

These figures are not surprising. With consumers adopting wireless technology at an all-time high, states and municipalities often see wireless services as a “cash cow” ready to be milked for as much revenue as they can garner. Rather than continuing to raise taxes and fees on wireless services, states and localities should look for ways to better manage the resources they already have and try to reduce the tax burdens on consumers.